The easiest way to approach such an abstract concept is to think of it as being made up of 4 overlapping layers: each layer an equal component to its overall functionality.
So, how exactly does the internet work?
The first layer is called the physical layer and this includes all the physical components of the network.
For example, in a telegraph transmission, a telegraph machine would be considered part of its physical layer
In an internet connection; copper wire, a modem and a computer would be part of its physical layer.
Now, for the more complex stuff.
The logical layer is related to the protocol that is used within the internet connection.
A protocol is the set of rules or language used to communicate.
For example, the telegraph uses the protocol called Morse Code.
The internet, uses the protocol called TCP/IP.
Now, the pattern of dots and lines are the alphabet that determines what the message is and where it's going to be sent. This alphabet follows the rules of the language of Morse Code.
Similarly, a data package, which contains a pattern of 1's and 0's, are the alphabet that determines what the information is and where it travels over the internet. This alphabet follows the rules of the language of TCP/IP.
So, when two computers are attempting to communicate with one another by changing information over the internet, they speak TCP/IP. Now, what TCP/IP does is direct the various data packets sent from one computer over the internet to its destination. What is unique about the language that the internet speaks is that it provides alternate routes for data packets to take in order to reach their destination. These routes are "nodes" or check points for information to take pit stops before continuing its journey throughout the internet. If any information is lost when reaching a node--much like hitting a dead-end--it simply reroutes to a different node and takes an alternate way to its destination.
Now the "Application Layer" is the 'intelligence' of the internet connection. For example, a telegraph operator would be part of the application layer of a telegraph communication.
This is because it possesses the intelligence to translate the Morse Code into the actual message it is supposed to represent.
For the internet, an e-mail client would be an example of this as well.
Whether you use Hotmail, Outlook Express, or Gmail, they all possess the knowledge to translate the 1's and 0's into the alphabetic form of an e-mail message the way it was originally created.
So think of it this way, without a telegraph operator, although the machinery and the protocol of Morse Code will allow the message to be sent and delivered; the transmission is pointless because the meaning of the message cannot be identified.
Similarly, once the data packets reach their destination by TCP/IP, if there isn't an application to translate the 1's and 0's, the file type cannot be identified. It will remain a meaningless set of 1's and 0's.
Finally, the "Content Layer" is what is translated by the application of the internet connection. So, one the Morse Code is translated, the meaning of the message is what is known as the "Content Layer" of the telegraph transmission. Similarly, once the e-mail client decodes the 1's and 0's, it is able to display the contents of an e-mail, the "Content Layer" of the internet connection.
So there you have it, your comprehensive breakdown of how the internet works.